Why Are the Returns to Education Higher for Entrepreneurs than for Employees?

Justin van der Sluis (), Mirjam Praag and Arjen van Witteloostuijn ()
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Justin van der Sluis: University of Amsterdam
Arjen van Witteloostuijn: University of Antwerp

No 3058, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We compare the returns to education (RTE) for entrepreneurs and employees, based on 19 waves of the NLSY database. By using instrumental variable techniques (IV) and taking account of selectivity, we find that the RTE are significantly higher for entrepreneurs than for employees (18.3 percent and 9.9 percent, respectively). We perform various analyses in an attempt to explain the difference. We find (indirect) support for the argument that the higher RTE for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education.

Keywords: entrepreneurship; self-employment; returns to education employment (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 J44 M13 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-09
New Economics Papers: this item is included in nep-bec, nep-edu, nep-ent, nep-hrm and nep-lab
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Citations: View citations in EconPapers (17)

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